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HomeMy WebLinkAboutItem 11b - Implementing Measure A to be Administered by the California Department of Tax and Fee Administration DATE: August 20, 2019 TO: Honorable Mayor and City Council FROM: Dominic Lazzaretto, City Manager By: Michael Bruckner, Assistant to the City Manager SUBJECT: RESOLUTIONS IMPLEMENTING MEASURE A TO BE ADMINISTERED BY THE CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION RESOLUTION NO. 7268 AUTHORIZING THE CITY MANAGER TO EXECUTE AGREEMENTS WITH THE CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION FOR IMPLEMENTATION OF LOCAL TRANSACTIONS AND USE TAX Recommendation: Adopt RESOLUTION NO. 7269 AUTHORIZING THE EXAMINATION OF TRANSACTIONS (SALES) AND USE TAX RECORDS Recommendation: Adopt SUMMARY On March 5, 2019, the City Council unanimously adopted Resolution No. 7246 to place Ordinance 2361, subject to voter approval, to impose a Transaction and Use Tax (“Sales Tax”) of 0.75%, on the June 4, 2019, Special Election ballot. The ballot measure was passed with 63.65% voter approval. The new tax rate, effective January 1, 2020, will increase the City’s Sales Tax rate from 9.5% to 10.25%, and is projected to generate an additional $8.6 million in Sales Tax revenue annually in the General Fund. Therefore, it is recommended that the City Council adopt Resolutions No. 7268 and 7269 authorizing the City Manager to enter into an agreement with the California Department of Tax and Fee Administration to implement Measure A and for the confidential examination of tax records generated therein. DISCUSSION The California Department of Tax and Fee Administration (“CDTFA”) administers and collects sales taxes for all jurisdictions throughout the state. In order to ensure that the Resolutions Implementing Measure A to be Administered by the CDTFA August 20, 2019 Page 2 of 3 new Sales Tax that was approved by Measure A is collected and administered, t he CDTFA requires passage of a Resolution approving two agreements with the State, as well as authorizing a City official to execute the required agreement. Approval of Resolution No. 7268 (Attachment “A”) would enable staff to complete the required process to authorize the CDTFA to begin implementation and collection of the additional Sales Tax increment beginning January 1, 2020. Additionally, the State Revenue and Taxation Code requires the City to designate representatives to be authorized to examine confidential Sales Tax records of the CDTFA. Resolution No. 7269 (Attachment “B”) authorizes the City Manager and Administrative Services Director to receive such information, and further allows the City Manager to designate others to receive the information. Due to the number of businesses collecting sales/transaction and use taxes statewide, and the complexity of the California’s point-of-sale regulations, the City contracts with HdL Companies (“HdL”) to review, analyze, and audit Sales Tax receipts in the City of Arcadia. Resolution No. 7269 would enable HdL to review confidential tax information and continue to provide audit fieldwork and analysis to ensure revenues are fully accounted for. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the environment. Therefore, this matter is exempt under CEQA. FISCAL IMPACT The implementation of Measure A as approved by Arcadia voters provides for an additional 0.75% in the City’s overall Sales Tax rate. Effective January 1, 2020, the Sales Tax rate will increase from 9.5% to 10.25%, the maximum currently allowed by State law. The additional revenue generated is approximately $8.6 million annually. Pursuant to Section 7272 of the California Revenue and Taxation Code, the City must reimburse the CDTFA up to $175,000 for preparation and administration of the new tax as well as ongoing costs to administer, collect, and remit tax to the City. These costs are withheld from tax remittances and no additional budget actions are required. RECOMMENDATION It is recommended that the City Council adopt the following resolutions implementing Measure A to be administered by the California Department of Tax and Fee Administration. a. Resolution No. 7268 authorizing the City Manager to execute agreements with the California Department of Tax and Fee Administration for implementation of a local Transactions and Use Tax; and Resolutions Implementing Measure A to be Administered by the CDTFA August 20, 2019 Page 3 of 3 b. Resolution No. 7269 authorizing the examination of Transactions (Sales) and Use Tax Records. Attachment “A” - Resolution No. 7268 Attachment “B” - Resolution No. 7269